Energy - April 5

Brent jumps to 2-1/2 year peakRobert Gibbons, Reuters Brent crude jumped to a 2-1/2 year peak above $122 a barrel on Tuesday, gaining for a fourth straight day as conflict and unrest in Africa and the Middle East more than offset China's latest interest rate hike. (5 April 2011)

Libyan Rebels Preparing to Export OilEdward Yeranian, Voice of America Libya's rebels are about to export their first oil shipment under a deal with Qatar to market crude from eastern Libya.

The Libyan opposition provisional national council is on the verge of gaining a key source of revenue as it prepares to begin shipping oil from the eastern port of Marsa al Hariga.

An oil tanker arrived Tuesday to take delivery of the first shipment.

Most of Libya's oil fields are in rebel-controlled territory, but production has slowed to a trickle due to the political and military conflict. A rebel spokesman said recently that the provisional council was hoping to increase production from 150,000 barrels per day to 300,000 barrels per day.

Al Jazeera TV reported Tuesday that fighting on the fringes of several eastern Libyan oil fields was endangering production facilities. It said forces loyal to Libyan leader Moammar Gadhafi had cut power to the Serir oil field and had arrested some employees at the Mesila field. Unconfirmed reports Monday spoke of artillery fire from pro-Gadhafi forces on both oil fields, but there was no confirmation of damage.

The government of Qatar has agreed to help the rebels market crude oil from eastern Libya. The opposition needs hard currency and weapons to fight Gadhafi loyalists. Qatar, France and Italy, Libya's former colonial power, have recognized the rebels as the country's legitimate government.

Khattar Abou Diab, who teaches political science at the University of Paris, says both Libya's strategic location on the Mediterranean Sea and the country's oil and gas reserves make it a prize for international rivals: (5 April 2011)

Libya and the World of OilNoam Chomsky, NY Times Syndicate via In These Times Last month, at the international tribunal on crimes during the civil war in Sierra Leone, the trial of former Liberian president Charles Taylor came to an end.

The chief prosecutor, U.S. law professor David Crane, informed The Times of London that the case was incomplete: The prosecutors intended to charge Moammar Gadhafi, who, Crane said, “was ultimately responsible for the mutilation, maiming and/or murder of 1.2 million people.”

But the charge was not to be. The U.S., U.K. and others intervened to block it. Asked why, Crane said, “Welcome to the world of oil.”

... The world of oil provides useful guidance for western reactions to the remarkable democracy uprisings in the Arab world. An oil-rich dictator who is a reliable client is granted virtual free rein. There was little reaction when Saudi Arabia declared on March 5, “Laws and regulations in the Kingdom totally prohibit all kinds of demonstrations, marches and sit-in protests as well as calling for them as they go against the principles of Shariah and Saudi customs and traditions.” The kingdom mobilized huge security forces that rigorously enforced the ban.

In Kuwait, small demonstrations were crushed. The mailed fist struck in Bahrain after Saudi-led military forces intervened to ensure that the minority Sunni monarchy would not be threatened by calls for democratic reforms.

Bahrain is sensitive not only because it hosts the U.S. Fifth Fleet but also because it borders Shiite areas of Saudi Arabia, the location of most of the kingdom’s oil. The world’s primary energy resources happen to be located near the northern Persian Gulf (or Arabian Gulf, as Arabs often call it), largely Shiite, a potential nightmare for Western planners. (3 April 2011)

6 surprising ways oil prices affect youMichael Sanibel, Investopedia via KTNV Oil shows up in thousands of places besides your car's fuel tank and engine. It's true that most oil is used as a source of energy in the United States and that's not likely to change anytime soon. The average barrel of oil yields the following: gasoline (42%), diesel (20%), jet fuel (9%), heating oil (4.5%), heavy fuel oil (4.5%), liquefied petroleum gases (4.5%) and other products (16%).

All you have to do to see the effect of changing oil prices is drive by a gas station. However, the effects are more far-reaching than what is immediately visible since petroleum permeates our entire economy. Here are some areas of the economy and products that are affected by oil prices.

1. Medicine

Petroleum is used in many of the medical products we take for granted. Visit any hospital or doctor's office and you will find these items that are derived from petroleum: heart valves, artificial limbs, stethoscopes, syringes, hearing aids, vaporizers, anesthetics, antiseptics, operating gloves and equipment tubing.

... The Bottom Line

Rising oil prices could have a very negative impact on the ability of the U.S. economy to mount a sustainable recovery. Consumers have to buy gas to get to their jobs and they have to put food on the table. At the moment, gasoline and food prices are experiencing more price inflation than many other commodities. That results in less discretionary income to spend on other things like entertainment, retail goods and travel.

If those sectors of the economy get hit as a result, there will be a ripple affect on other businesses that depend on consumer spending to stay profitable. With unemployment currently at 8.9% according to U.S. Bureau of Labor Statistics, rising oil will make it more difficult for businesses to expand and hire more people. (x April 2011)

Over a Barrel (audio)Sandra Kanthal (producer), BBC Turmoil across the Middle East sent oil prices jumping and has raised big questions about the security of the energy supplies that have powered the world economy for the past 100 years. Peter Day investigates the future of oil.and what the current upheavals might mean for other energy supplies. (3 April 2011)Suggested by reader NJW who writes: "They seem to be rather confused about the relationship between production and discovery. Might someone contact the BBC to explain the lagging shortfall in discovery?"

UPDATE: More from NJW "The reason I wanted to bring this to your attention is that the BBC is finally starting to wakeup to peak oil and the consequences. It's encouraging that the program enlisted the enlightened views of Chris Skrebowski (Founding Director, Peak Oil Consulting) and Dr. Tim Morgan (Global Head of Research, Tullet Prebon).

Nonetheless, I think the program painted an overoptimistic picture of the downslope of Hubbert's peak, e.g. no mention of Net Energy. Should you be able to find someone at EnergyBulletin to analyse the content and send their thoughts to the presenter & producer (respectively cc'd) then it might help to set the record straight in case there are follow-up programs on the BBC from In Business or otherwise. "

Jim Rogers: I don't believe in "belief." I only like to invest in things that I think I know. People who fall in love with their investments or believe in them, usually have problems. I think commodity prices are going to continue to go much, much higher. In several years, we are going to continue to see shortages of things to develop and there continues to be very little investment in productive capacity of anything. Agriculture is continuing to turn into a disaster and I continue to encourage people to understand that those shortages are going to get worse, and that there is going to be more social unrest around the world, and that more governments are going to fall around the world.

People don't go into the streets if the price of copper makes new highs but when the price of rice and wheat and sugar go through the roof, everybody knows it instantly at the same time and everybody is unhappy instantly, and at the same time. So that's where you have serious problems developing and shortages, and that's why agriculture is a great place to invest. There are plenty of ways to invest in agriculture. There are going to be shortages of food and this will continue. As I said before, my portfolio is in commodities and currencies on the long side.

Daily Bell: What about oil? Give us your take on Peak Oil. Is it real? Does it exist?

Jim Rogers: I don't know if there is Peak Oil or not. I do know that known reserves of oil are in decline. That is a very simple statement. Is there a staggering amount of oil out there in the world? We don't seem to know where it is, though we hope we find it soon and that it is accessible. The price of oil and all energy is also going much higher.

Daily Bell: Any comment on water shortages? Is potable water the next big investment?

Jim Rogers: I don't know if we discussed water last time but I have discussed it many times. There are huge shortages of water developing. We have wars developing east of the Red Sea over oil, and we are going to have wars west of the Red Sea over water. Northern India has a staggering water problem and so does northern China. Southwestern part of the US has big water problems. If you can find a way to invest in water, you are going to be extremely successful and rich.

You shouldn't own water, though, because if you own water the politicians are going to snarl and sneer and say you are capitalizing on God's-given-right to water, you filthy capitalist. If you are lucky, they will hang you in the public square. If you are unlucky, it will be worse. But if you can transfer water or clean water or provide water, they will build a monument to you in the public square, and you will be extremely rich. (4 April 2011)

Can 'peak oil' help slow climate change?The ultimate climate change FAQ, Guardian/UK ... If those concerned about peak oil are proved correct, and a fall in oil production triggered a major economic down-swing, this would likely reduce the global rate of carbon emissions for a period, just as other recessions have done. But even a very severe global recession wouldn't reduce emissions sufficiently to "solve" climate change – and indeed the longer-term impact of the oil peak could be to accelerate rather than decelerate global warming. That's because falling availability of crude oil could boost the production of even more carbon-intensive alternatives such as oil extracted from tar sands or "synfuel" produced from coal. (1 April 2011)

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